- Matthew Brown
The introduction of the new pensions auto-enrolment legislation has long been discussed in much of the media. However, as many recruitment businesses are given introduction or staging dates a year or two down the line due to their size, it can be all too easy to put this on the back burner with the intention of coming back to it nearer the time. And why not, we are all very busy, so why should we focus on something that won’t affect us until next year and beyond?
Simply put, we can’t afford to wait and potentially make mistakes. Regardless of your staging date, it is vital that you start planning now. There are many issues to bear in mind, such as how to communicate to your temporary employees, what to tell them when they ask you, which can potentially make the planning process longer than first thought.
Added to this, as larger companies begin to roll out their own auto-enrolment plans, it’s wise to learn from their experiences and use this to your advantage. Keep an eye out for any organisations which are openly sharing their insights into their processes. Consider what worked well for them, what perhaps didn’t, and see how you can replicate their success and avoid their mistakes.
So, your staging date is potentially months or years away, here’s what you can do.
What’s involved with pensions auto-enrolment?
First things first, let’s just clarify what this new legislation covers. Under the new Pensions Act, which came into force as a means to increase pensions savings in the UK, all recruitment agencies will be required to enrol employees and PAYE workers automatically into a pension scheme.
PAYE workers on your payroll are legally considered to be your employee and as such will have to be enrolled automatically. Unless an employee chooses to opt out, employers will be required to make a contribution to pensions alongside the individual.
All UK employees are eligible and should be automatically enrolled into the pensions scheme if they are between the age of 22 and state pension age, are currently working in the UK and are earning above £8,105 per year. However, anyone who isn’t eligible has the right to opt into a company pension scheme and cannot legally be excluded.
But what does this mean for recruiters?
As a business, you will be required to provide a pension for your employees and automatically enrol any eligible person at your staging date. All agencies should have already been informed of this date, however if you haven’t had yours yet, here’s where you can get more information online.
Once you have your staging date, there are a few steps you need to take. First, analyse any current pensions arrangements to see if they are suitable. If not, analyse what other options are available. For those agencies who have no previous scheme, consider your contribution choices. Legally, the employer contribution is a minimum of 1 to 2 % of qualifying earnings, rising to 8 to 9% by 2018 for some depending on the contribution option you choose. If you’re unsure as to which option is best for your agency, it is highly recommended that you seek expert advice.
The scheme will obviously have a financial impact on your agency; not only for the contribution level to be made but also for any processes which will need to be put in place. If your staging date is a few years away, start researching the extent of these costs and processes now. Analyse which employees are eligible and budget for this number, but don’t forget to factor in the potential cost of any non-eligible employees who may wish to enter into the scheme. Research the various options available and make sure you choose the pension scheme that best caters for your agency’s needs.
Managing temporary workers
If you have temporary workers on your payroll, you are effectively their employer and will be required to pay into the scheme if they are eligible. Should this be your situation, it is worthwhile communicating with them about what this new legislation means for them and what pension auto-enrolment procedures you will be putting in place.
If however you use an umbrella employer for your temporary workers, it will be the umbrella’s responsibility to discuss requirements directly with the employee once they have been referred by you. If you haven’t heard from your umbrella employer on this issue yet, speak to them and clarify any plans.
Pensions auto enrolment will have an impact on companies of all sizes at some point during the roll out phase. But don’t wait to start planning for your staging date, even if it is at the later end of the spectrum. The new regulations contain safeguards to ensure companies are compliant, with fines costing up to £50,000 which could prove to be significant if you don’t get this right. Use the time you have to thoroughly research and analyse the options available to you and put in place a communications plan to ensure everything runs smoothly. And don’t be afraid to seek advice should you need it.
Matthew Brown is Managing Director of giant